Impacts of East-West Highway Corridor

ISET Policy Institute uses innovating approach to provide an analytical foundation to assess the indirect economic benefits of continued donor investment in the EWH corridor. ISET Policy Institute was contracted by the World Bank to assess the indirect economic benefits of the East-West Highway. ISET-PI proposed to build upon its own CGE model for Georgia and to further develop it in order to match project objective. Through the use of the CGE model, the research seeks to find answers to some of the following questions:

Could the EWH lower transportation costs for household producers of goods and services? What are the economy wide impacts of the EWH Corridor on employment, real GDP growth, investment, productivity, and trade? Could EWH foster an increase in households production of goods and services? Could these effects translate into higher household income and consumption? Could the corridor help bridge the existing economic divide between rural and urban areas in Georgia? The study should test whether the project's direct and indirect benefits can bring about significant productivity, efficiency and trade stimulus effects for the Georgian economy and, on household welfare.

The East-West Highway (EWH) carries over 60 percent of the total foreign trade and is seen as a central piece in the Government's strategy of transforming Georgia into a transport and logistics hub for trade between Central Asia and the Far East on the one hand and Turkey and Europe on the other hand. The East West Highway is part of the European route E-60, which is the second longest E-road running from Brest, France (on the Atlantic coast), to Irkeshtam, Kyrgyzstan (on the border with People's Republic of China). In Georgia, it runs from the Red Bridge at the Azerbaijan Border to the Poti Port at the Black Sea coast for around 392 kilometers (2 percent of the Georgian road network length, and slightly less than a quarter of the international road network) with an average traffic of around 7,800 vehicles per day and traffic annual growth rate of around 7.0 percent. The East West Highway accounts for 23 percent of the vehicle utilization in Georgian roads, which represents 47 percent of vehicle utilization of Georgian international roads. The 2014 Enabling Trade Index (ETI) ranks Georgia 56th out 138 countries for the availability and quality of transport infrastructure. The improvement of the East West Highway Corridor will improve connectivity between the Caspian and Black Sea, lower cost of transport and logistics and improve Georgia's ranking and connection to global markets.